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Hedge Funds Have Never Been This Bullish On CAE, Inc. (CAE)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards CAE, Inc. (NYSE:CAE).

Is CAE, Inc. (NYSE:CAE) a buy, sell, or hold? The smart money is in a bullish mood. The number of bullish hedge fund bets went up by 10 in recent months. Our calculations also showed that CAE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a lot of tools stock traders employ to size up their holdings. A pair of the best tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top money managers can outperform the S&P 500 by a significant margin (see the details here).

PENNANT CAPITAL MANAGEMENT

Alan Fournier of Pennant Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action encompassing CAE, Inc. (NYSE:CAE).

What does smart money think about CAE, Inc. (NYSE:CAE)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in CAE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in CAE, Inc. (NYSE:CAE), which was worth $16.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $14.8 million worth of shares. Sandler Capital Management, Two Sigma Advisors, and Goodnow Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Banbury Partners allocated the biggest weight to CAE, Inc. (NYSE:CAE), around 2.5% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, designating 2.04 percent of its 13F equity portfolio to CAE.

As one would reasonably expect, specific money managers have jumped into CAE, Inc. (NYSE:CAE) headfirst. Goodnow Investment Group, managed by Edward Goodnow, established the largest position in CAE, Inc. (NYSE:CAE). Goodnow Investment Group had $6.9 million invested in the company at the end of the quarter. Alan Fournier’s Pennant Capital Management also made a $5.7 million investment in the stock during the quarter. The following funds were also among the new CAE investors: Baker Burleson and Stormy Scott’s Banbury Partners, Greg Eisner’s Engineers Gate Manager, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CAE, Inc. (NYSE:CAE) but similarly valued. These stocks are QTS Realty Trust Inc (NYSE:QTS), Stag Industrial Inc (NYSE:STAG), Grupo Televisa SAB (NYSE:TV), and Mirati Therapeutics, Inc. (NASDAQ:MRTX). All of these stocks’ market caps match CAE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QTS 21 365837 -2
STAG 15 79203 -3
TV 19 481852 0
MRTX 33 1122981 1
Average 22 512468 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $79 million in CAE’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 15 bullish hedge fund positions. CAE, Inc. (NYSE:CAE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on CAE as the stock returned 38% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.